What a Solution to the Corporate Dominance Problem Would Look Like

The 99% means the vast majority of people. Optimizing their quality of life is the common good and the goal of democracy. This goal can be achieved only if it is the top goal of the system's dominant agents, since the goal of a social system's dominant agents determine the goal's of the system.

No one can predict where a balancing loop with an optimize-quality-of-life goal will take the human system. The innovative examples shown above are mere conjecture, because no human political system has ever been in the optimize-quality-of-life mode for long.

Suppose progressives could unite behind the common vision of reengineering society to have the optimize-quality-of-life goal. This seems to be our dream anyhow. All this article is doing is analyzing how to get there. It appears this can be done by destroying The Runaway Corporate Dominance Reinforcing Loop and simultaneously creating The Good Corporate Servant Balancing Loop, all by changing the goal of the modern corporation. This requires:

Moving from Corporation 1.0 to 2.0

The modern for-profit corporation was never rigorously designed. It evolved. This has led to what we have today. Let's call this Corporation 1.0 and Corporatis profitis.

The one and only goal of Corporatis profitis is short term profit maximization. This goal caused The Runaway Corporate Dominance Reinforcing loop drawn above to appear. The node on the right shows how "drip by steady drip, over time all that favoritism tips the scales and changes the rules of the game to favor corporations." Below is the stunning result of centuries of that steady drip:

In the first attribute Homo sapiens has the advantage. In the second attribute they are equal. In all the rest corporations have the overwhelming advantage. Poor Homo sapiens doesn't stand a chance, unless we put everything else aside and focus our efforts on one single thing: resolving the root cause of the corporate dominance problem. As Part One explained:

The main root cause is mutually exclusive goals between the corporate life form and Homo sapiens. Large for-profit corporations now dominate the planet. Their goal is maximization of short term profits. The goal of people is to optimize long term quality of life, for those living and their descendents. These goals are so incompatible they cannot both be achieved in the same system.

If the root cause is the wrong goal, then the solution is the right goal. The goal of Corporation 2.0 would be providing the goods and services needed to optimize quality of life for people in a socially, environmentally, and economically sustainable way. There is no need for pursuit of profits in that goal. In fact, the newly engineered Corporation 2.0 should have no incentive to maximize profits, since that causes the corporate dominance loop to appear. Therefore Corporation 2.0 should be non-profit. This is a radical change. But once you understand the analysis it's fully justified.

Retained earnings would be allowed. These internal profits are necessary to build the assets necessary to carry out the corporate life form's new goal, which can be summarized as "optimize quality of life for people." Dividends to owners or stockholders would no longer be allowed. Gone is the perverse incentive to maximize short term dividends at the expense of all sorts of terrible side effects.

The monumental benefit of Corporation 2.0 being non-profit is the corrosive impact of short term profit maximization disappears as a fundamental driver of the human system. The new way of corporate thinking will run about like this: “I’m no longer going to argue my company must resist anything that hurts my profits, because that’s no longer my bottom line. Instead, my new bottom line is to serve the needs of people. If my government or my fellow citizens propose a way to do that better, and I can’t think of an even better way, then I’m all for it.”

With one simple change to the law, everything changes. All a state or nation needs to do is pass legislation about like this: 1

Corporate law is hereby amended to redefine allowable types of non-federal corporations. The type widely known as for-profit is no longer permitted. This leaves the other type, non-profit, as the only allowable type. This act shall take effect on the last day of this year.

The five defining characteristics of the modern for-profit corporation have until now been: (1) separate legal personality, (2) delegated management, (3) limited liability, (4) transferable shares, and (5) investor ownership. Hereafter the last three characteristics are prohibited except in the case of non-profit worker cooperatives. For-profit corporate stock may no longer be bought or sold. Nor may dividends be paid on it.

The intent of this law is to align the goal of the modern corporation with that of Homo sapiens, whose goal is to optimize the common good for all living people and their descendents.

To implement this intent, all for-profit corporate charters shall be revised to be non-profit and shall include this statement:

This corporation is an artificial life form created by humans to serve their needs and is thus not a natural person. Nor is it an artificial person. It is an artificial servant. The overriding goal of this servant shall be to serve the needs of its human master to the best of its abilities, by providing goods and/or services that benefit the common good first and its customers second. No other goal shall have a greater or equal priority.

To allow a smooth ten year transition that does not disrupt the welfare of the people, a percentage of corporations, chosen at random, shall be converted each year. This shall start at .125% in the first year and increase to .25%, .5%, 1%, 2%, 4%, 8%, 16%, 32%, and finally 36.25% in the tenth year. For-profit corporations are encouraged to convert earlier than the year they are selected, since this will enhance their reputation as a trustworthy servant and thus increase their likelihood of survival.

At the end of each year, for that year’s converting corporations all their stock shall change to the equivalent of loans by shareholders to corporations. Loan value per share shall be calculated as the tangible book value of a corporation divided by the total number of shares. The full principle of these loans shall be paid off to loan owners over a period of thirty years. During that time interest on the remaining principle shall be paid quarterly at a rate of, for each stock, the average dividend rate for the last five years for common shares and the stipulated dividend rate for preferred shares divided by average share value.

This is of course only a rough illustrative example in plain English.

The hodgepodge of different incorporation laws in the states of some countries should be replaced by uniform national laws. This eliminates the tendency for a race to the bottom among states to break out, as states compete for more revenue via weaker incorporation laws. For the same reason, uniform international law should eventually be implemented.

A powerful hypnotic fallacy promoted by the corporate life form is that profits are necessary to motivate invention and entrepreneurs. What they really mean is profits in their present form of dividends to outside owners. There are other approaches, namely a non-profit approach.

Non-profit corporations can do anything for-profit corporations can do. This has been proven by many non-profits. An outstanding example is the Mondragon Corporation of Spain, a highly successful worker cooperative of 100,000 members: 2

The Mondragon Corporation, thousands of credit unions and agricultural coops, hundreds of thousands of NGOs, and more are an example of what a solution to the corporate dominance problem would look like. Each is living proof this solution can work... because it already has worked. All we need to do is scale up this already proven solution.

The dream

Mahatma Gandhi had a dream. Martin Luther King had a dream. So did Nelson Mandela, the Polish Solidarity Trade Union, and Harriet Beecher Stowe. All these visionaries dreamed it was possible to throw off an oppressor. All of them ultimately won.

It can be done again by solving the complete sustainability problem.

The sustainability problem includes the social, environmental, and economic sustainability problems. It thus includes the corporate dominance problem, because that problem is the foremost underlying cause of all these forms of unsustainability.

Solve the root cause of the corporate dominance problem and the most powerful life form on the planet will now be working for the human system instead of against it.

The analysis was performed over a seven year period from 2003 to 2010. The results are summarized in the Summary of Analysis Results, the top of which is shown below:

Click on the table for the full table and a high level discussion of analysis results.

The Universal Causal Chain

This is the solution causal chain present in all problems. Popular approaches to solving the sustainability problem see only what's obvious: the black arrows. This leads to using superficial solutions to push on low leverage points to resolve intermediate causes.

Popular solutions are superficial because they fail to see into the fundamental layer, where the complete causal chain runs to root causes. It's an easy trap to fall into because it intuitively seems that popular solutions like renewable energy and strong regulations should solve the sustainability problem. But they can't, because they don't resolve the root causes.

In the analytical approach, root cause analysis penetrates the fundamental layer to find the well hidden red arrow. Further analysis finds the blue arrow.Fundamental solution elements are then developed to create the green arrow which solves the problem. For more see Causal Chain in the glossary.

This is no different from what the ancient Romans did. It’s a strategy of divide and conquer. Subproblems like these are several orders of magnitude easier to solve because you are no longer trying (in vain) to solve them simultaneously without realizing it. This strategy has changed millions of other problems from insolvable to solvable, so it should work here too.

For example, multiplying 222 times 222 in your head is for most of us impossible. But doing it on paper, decomposing the problem into nine cases of 2 times 2 and then adding up the results, changes the problem from insolvable to solvable.

Change resistance is the tendency for a system to resist change even when a surprisingly large amount of force is applied.

Overcoming change resistance is the crux of the problem, because if the system is resisting change then none of the other subproblems are solvable. Therefore this subproblem must be solved first. Until it is solved, effort to solve the other three subproblems is largely wasted effort.

The root cause of successful change resistance appears to be effective deception in the political powerplace. Too many voters and politicians are being deceived into thinking sustainability is a low priority and need not be solved now.

The high leverage point for resolving the root cause is to raise general ability to detect political deception. We need to inoculate people against deceptive false memes because once people are infected by falsehoods, it’s very hard to change their minds to see the truth.

Life form improper coupling occurs when two social life forms are not working together in harmony.

In the sustainability problem, large for-profit corporations are not cooperating smoothly with people. Instead, too many corporations are dominating political decision making to their own advantage, as shown by their strenuous opposition to solving the environmental sustainability problem.

The root cause appears to be mutually exclusive goals. The goal of the corporate life form is maximization of profits, while the goal of the human life form is optimization of quality of life, for those living and their descendents. These two goals cannot be both achieved in the same system. One side will win and the other side will lose. Guess which side is losing?

The high leverage point for resolving the root cause follows easily. If the root cause is corporations have the wrong goal, then the high leverage point is to reengineer the modern corporation to have the right goal.

The world’s solution model for solving important problems like sustainability, recurring wars, recurring recessions, excessive economic inequality, and institutional poverty has drifted so far it’s unable to solve the problem.

The root cause appears to be low quality of governmental political decisions. Various steps in the decision making process are not working properly, resulting in inability to proactively solve many difficult problems.

This indicates low decision making process maturity. The high leverage point for resolving the root cause is to raise the maturity of the political decision making process.

In the environmental proper coupling subproblem the world’s economic system is improperly coupled to the environment. Environmental impact from economic system growth has exceeded the capacity of the environment to recycle that impact.

This subproblem is what the world sees as the problem to solve. The analysis shows that to be a false assumption, however. The change resistance subproblem must be solved first.

The root cause appears to be high transaction costs for managing common property (like the air we breath). This means that presently there is no way to manage common property efficiently enough to do it sustainably.

The high leverage point for resolving the root cause is to allow new types of social agents (such as new types of corporations) to appear, in order to radically lower transaction costs.

Solutions

There must be a reason popular solutions are not working.

Given the principle that all problems arise from their root causes, the reason popular solutions are not working (after over 40 years of millions of people trying) is popular solutions do not resolve root causes.

This is Thwink.org’s most fundamental insight.

Summary of Solution Elements

Using the results of the analysis as input, 12 solutions elements were developed. Each resolves a specific root cause and thus solves one of the four subproblems, as shown below:

Click on the table for a high level discussion of the solution elements and to learn how you can hit the bullseye.

The 4 Subproblems

The solutions you are about to see differ radically from popular solutions, because each resolves a specific root cause for a single subproblem. The right subproblems were found earlier in the analysis step, which decomposed the one big Gordian Knot of a problem into The Four Subproblems of the Sustainability Problem.

Everything changes with a root cause resolution approach. You are no longer firing away at a target you can’t see. Once the analysis builds a model of the problem and finds the root causes and their high leverage points, solutions are developed to push on the leverage points.

Because each solution is aimed at resolving a specific known root cause, you can't miss. You hit the bullseye every time. It's like shooting at a target ten feet away. The bullseye is the root cause. That's why Root Cause Analysis is so fantastically powerful.

The high leverage point for overcoming change resistance is to raise general ability to detect political deception. We have to somehow make people truth literate so they can’t be fooled so easily by deceptive politicians.

This will not be easy. Overcoming change resistance is the crux of the problem and must be solved first, so it takes nine solution elements to solve this subproblem. The first is the key to it all.

B. How to Achieve Life Form Proper Coupling

In this subproblem the analysis found that two social life forms, large for-profit corporations and people, have conflicting goals. The high leverage point is correctness of goals for artificial life forms. Since the one causing the problem right now is Corporatis profitis, this means we have to reengineer the modern corporation to have the right goal.

Corporations were never designed in a comprehensive manner to serve the people. They evolved. What we have today can be called Corporation 1.0. It serves itself. What we need instead is Corporation 2.0. This life form is designed to serve people rather than itself. Its new role will be that of a trusted servant whose goal is providing the goods and services needed to optimize quality of life for people in a sustainable manner.

What’s drifted too far is the decision making model that governments use to decide what to do. It’s incapable of solving the sustainability problem.

The high leverage point is to greatly improve the maturity of the political decision making process. Like Corporation 1.0, the process was never designed. It evolved. It’s thus not quite what we want.

The solution works like this: Imagine what it would be like if politicians were rated on the quality of their decisions. They would start competing to see who could improve quality of life and the common good the most. That would lead to the most pleasant Race to the Top the world has ever seen.

Presently the world’s economic system is improperly coupled to the environment. The high leverage point is allow new types of social agents to appear to radically reduce the cost of managing the sustainability problem.

This can be done with non-profit stewardship corporations. Each steward would have the goal of sustainably managing some portion of the sustainability problem. Like the way corporations charge prices for their goods and services, stewards would charge fees for ecosystem service use. The income goes to solving the problem.

Corporations gave us the Industrial Revolution. That revolution is incomplete until stewards give us the Sustainability Revolution.

This analyzes the world’s standard political system and explains why it’s operating for the benefit of special interests instead of the common good. Several sample solutions are presented to help get you thwinking.

Note how generic most of the tools/concepts are. They apply to far more than the sustainability problem. Thus the glossary is really The Problem Solver's Guide to Difficult Social System Problems, using the sustainability problem as a running example.